Correlation Between Namhae Chemical and Woori Technology
Can any of the company-specific risk be diversified away by investing in both Namhae Chemical and Woori Technology at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Namhae Chemical and Woori Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Namhae Chemical and Woori Technology, you can compare the effects of market volatilities on Namhae Chemical and Woori Technology and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Namhae Chemical with a short position of Woori Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Namhae Chemical and Woori Technology.
Diversification Opportunities for Namhae Chemical and Woori Technology
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Namhae and Woori is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Namhae Chemical and Woori Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woori Technology and Namhae Chemical is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Namhae Chemical are associated (or correlated) with Woori Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woori Technology has no effect on the direction of Namhae Chemical i.e., Namhae Chemical and Woori Technology go up and down completely randomly.
Pair Corralation between Namhae Chemical and Woori Technology
Assuming the 90 days trading horizon Namhae Chemical is expected to under-perform the Woori Technology. But the stock apears to be less risky and, when comparing its historical volatility, Namhae Chemical is 3.34 times less risky than Woori Technology. The stock trades about -0.13 of its potential returns per unit of risk. The Woori Technology is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 226,500 in Woori Technology on August 28, 2024 and sell it today you would earn a total of 8,000 from holding Woori Technology or generate 3.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Namhae Chemical vs. Woori Technology
Performance |
| Timeline |
| Namhae Chemical |
| Woori Technology |
Namhae Chemical and Woori Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Namhae Chemical and Woori Technology
The main advantage of trading using opposite Namhae Chemical and Woori Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Namhae Chemical position performs unexpectedly, Woori Technology can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Woori Technology will offset losses from the drop in Woori Technology's long position.| Namhae Chemical vs. LG Chemicals | Namhae Chemical vs. Lotte Chemical Corp | Namhae Chemical vs. Hyundai Steel | Namhae Chemical vs. Seah Steel Corp |
| Woori Technology vs. Korea Real Estate | Woori Technology vs. Korea Ratings Co | Woori Technology vs. IQuest Co | Woori Technology vs. Wonbang Tech Co |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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